Picking the best-performing artificial intelligence (AI) stocks every year isn’t easy. That was the case in 2023 Nvidia. In 2024, all signs point towards Palantir Technologies. This shift from AI hardware to AI application software was predictable because it has to be deployed and become usable at some point before all the investment dollars in hardware pay off.
As a result, I think we’ll see another AI software company rise to the top in 2025. My prediction is that this will be the case SoundHound AI (NASDAQ: SOUND)even though it has already had an incredibly strong year in 2024, with an increase of more than 300%. How can a company that has already risen so much be a top pick for 2025?
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SoundHound AI’s platform aims to convert voice input into a prompt for an AI platform. This has multiple applications, including automotive manufacturing, restaurants, financial services, insurance and healthcare. The company already has products for these industries, and automakers and restaurants are among its biggest customers.
Still, by 2024 the company has become quite diversified. During the third quarter of last year, 72% of sales came from one customer and 90% of total sales came from the automotive sector. Now the largest customer contributed only 12% of sales, while the largest sector accounted for 25% of sales.
This diversification is an important part of SoundHound becoming more relevant across all sectors and growing into a more stable company. If that one customer were to leave at the end of 2023, the company might have gone bankrupt. If the biggest customer leaves now, it will still hurt, but not as much as before.
While SoundHound still poses risks, this plays a big role in lowering that level of risk.
In the third quarter, revenue grew 89% year over year to $25.1 million. This makes it a small-cap stock, as its revenue in the last twelve months totals $67 million. For other, more established software companies, that would be a fairly small percentage of total revenue, but the expectation is that the company won’t stay there for long.
Management project revenue for 2025 will be between $155 million and $175 million, which is almost double the revenue it expects for 2024. It is understood that SoundHound expects its business to continue its growth into 2025.
This also highlights an important investment point: how high is the limit if their products become the industry standard in audio recognition? Think of all the ways we use our voice to determine what we do; Now imagine this being associated with the power of AI. SoundHound could be a big winner in this area even after rising so much.
